Small Business Labs

Is 3D Printing the Future of Small Manufacturing?

3D printing is similar to paper printing, except the printer creates 3D objects by spraying layers of plastic, metal or ceramics into shapes. 

The technology has been around for a long time, but reductions in costs and improvements in sprayable materials is making it viable for a growing number of small manufacturing and personal production applications.

There's been a spurt of press around this topic of late:

Shapeways, a leader in personal production using 3D printer technology, has announced the opening of a New York city production facility.  Shapeway users will be able to create their designs online and have them printed (manufactured) by Shapeways 3D printers in their new facility. 

Shapeways has a nice video (at bottom of page) showing how 3D printing works.  You can also take a look at their marketplace to see and purchase printed products. 

Also, the Institute for the Future has an excellent, if challenging to navigate, website on 3D printing.  It's called The Future of Open Fabrication and it's well worth wading through. 

The recent article A Strategist's Guide to Digital Fabrication, from Strategy + Business, is another good resource on this topic. 

3D printing gets a lot of press as the future of manufacturing.  We agree it will play a key role in the future, especially for small run manufacturing.  But it's just one of many technologies making small and personal manufacturing more viable.  We cover these in our small manufacturing category. 

For more on this topic, see our 3D Printing Comes of Age post from last year. It covers 3D printing in more detail and has links to other resources on 3D printing. 

The Trend Towards U.S. Manufacturing Continues to Accelerate

The Boston Consulting Group (BCG) is forecasting a major uptick in U.S. manufacturing.  Key quote from their most recent study:

"Over the next five years, a U.S. manufacturing renaissance in home appliances, car parts, and other sectors could accelerate—boosting output by $100 billion and adding 2 million to 3 million jobs."

There are currently about 11.7 million manufacturing jobs in the U.S. - down from over 16 million in the late 1990s.  To paraphrase our Vice President, adding 2-3 million manufacturing jobs would be a big "bad word" deal. 

We first noticed companies starting to shift manufacturing back to the U.S. in 2007.  Although the Great Recession slowed this shift, it's started to pick up again with the global economic recovery.  By early 2010 it was clear this trend was real and would continue to grow in importance.

The drivers are:

• rising overseas production costs, particularly in China
• strong U.S. productivity
• rising transportation costs
• better understanding of the total costs of long supply chains

The last point is growing in importance and is nicely illustrated in the New York Times article A Company Grows, and Builds a Plant Back in the U.S.A.  Key quote on long supply chains:

"The lead time for orders coming from China is three weeks, and all of our brewery clients want our products faster — that’s the first thing they say when we meet with them. ... Right now, we’re losing orders because of lead time."

A growing number of companies have this supply chain "need for speed." Also increasing is the number of products using shorter production runs and/or requiring customization.  These shifts favor locating near sources of demand to cut product cycle times. 

Add in the potential of supply disruptions and the environmental impact of long supply chains, and it's easy to see why manufacturing in the U.S. is becoming more popular. 

3D Toy Printing for Kids

Origo is creating a 3D printer for kids.  The idea is kids can design their own toys using a very simple, PC-based drawing application and then make them out of plastic using the printer. 

The picture on the right is an artist's rendering of their 3D Printer. 

For those not familiar with 3D printing, my favorite description comes from a New York Times article on the topic from about 18 months ago:

A 3-D printer, which has nothing to do with paper printers, creates an object by stacking one layer of material — typically plastic or metal — on top of another, much the same way a pastry chef makes baklava with sheets of phyllo dough.

Long ago when I was a kid I had a similar product that used a very different technology - Mattel's Vac-U-Form. 

I had asked my parents for a Thing Maker, which made creepy crawlers.  But the Vac-U-Form was cheaper and my raised-in-the-depression era parents saw no reason to spend the extra $8 bucks just because it was my birthday. 

         

Not that I'm still mad at them, but creepy crawlers were so much cooler. 

We've long followed 3D printers.  They've been around several decades, but due to technology improvements and price drops they're getting a lot more notice these days.  Our 3D Printing Comes of Age post provides an overview of 3D printers and links to other resources on the topic.

The Singularity Hub has more on Origo's 3D printer. 

Canada's Small Manufacturing Renaissance

The Globe and Mail has a great special section on Canadian manufacturing.  Much like what is going on the U.S., smaller niche manufacturing companies are starting to thrive.

They are doing this by finding defensible niches where they can compete using innovation, speed and intellectual capital.  Key quote on the lessons learned by the owner of a specialty motor maker:

One of the lessons he has learned is that trying to compete with motor makers in China and elsewhere that can mass produce them makes little sense. He urges other Canadian manufacturers to follow his lead and find a niche.

The special section has several articles and slideshows, as well as videos.  There is too much there to cover here, so to learn more visit the Globe and Mail.

We also cover small manufacturing here at Smallbizlabs. 

Thanks to Grant Wickes at Wasp Barcode Technologies for pointing me to the story. 

The U.S. Manufacturing Renaissance

The strategy consulting firm The Boston Consulting Group released a study predicting that over the next 5 years the U.S. will see manufacturing boom.  The reasons?  Higher costs in China, more expensive supply chains and growing U.S. productivity. 

Key quote from their study press release:

"Products that require less labor and are churned out in modest volumes, such as household appliances and construction equipment, are most likely to shift to U.S. production. Goods that are labor-intensive and produced in high volumes, such as textiles, apparel, and TVs, will likely continue to be made overseas."

The big driver leading to higher overseas manufacturing costs are higher wages.  This is particularly true in China.  As a recent Wall Street Journal article points out, "Wages are rising in China, heralding the possible end of an era of cheap goods." 

The same article quotes William Fung, head of the giant manufacturing-outsourcing company Li & Fung, who is predicting "China's wages will increase 80% over the next five years."  Anyone out there think U.S. manufacturing wages will increase anywhere near 80% over the next 5 years? 

We first reported on the trend towards manufacturing returning to the U.S. in 2007.  At that time, the products coming back to the U.S. to be made had high transportation costs relative to the value of product, and/or small production runs.

The Great Recession slowed the shift back to the U.S., but it picked up with the economic recovery.  As we pointed out last year in The Trend Towards U.S. Manufacturing, this trend is accelerating and we expect many more companies will choose to manufacture in the U.S. in the coming decade.

Small manufacturers will benefit from this shift, and we expect this sector to show strong growth over the next decade. 

Germany's Amazing Mittelstands

Good coverage in the Christian Science Monitor of Germany's famous Mittelstands - the 3 million small and mid-sized businesses that form the backbone of Europe's largest economy.  Key quote:

"The Mittelstand account for more than half of German exports and 70 percent of its workforce."

Mittelstands tend to be concentrated in 4 sectors: machine tools, auto parts, chemicals, and electrical equipment.  They also tend to be family-owned or controlled, focused on long term performance and employee oriented. 

Because they are mostly industrial companies, most Mittelstands aren't well  known.  One exception is Mont Blanc pens, which like most Mittelstands does most of its manufacturing in Germany.      

The article also covers the rise of Berlin, often called the new Paris or New York, as a growing center for the arts and entertainment.  Key quote:

"Low costs have made the city a magnet for artists and writers. By some estimates, more than 65,000 artists reside here. It is also an unofficial playground for the under-30 "globorati" who fly in on cheap flights from Barcelona, Spain, and Rome."

Our recent trip to Europe confirmed this.  Berlin is amazing. 

3D Printing Comes Of Age

The New York Times article 3-D Printing Spurs Is Spurring a Manufacturing Revolution covers the growing impact of this technology. 

The article contains a nice, non-technical description of 3D printing:

A 3-D printer, which has nothing to do with paper printers, creates an object by stacking one layer of material — typically plastic or metal — on top of another, much the same way a pastry chef makes baklava with sheets of phyllo dough.

3D printers have been around for years, but until fairly recently they were expensive and used almost exclusively for product design and rapid prototyping. 

But their prices have fallen substantially over the last few years and low end professional 3D printers cost less than $5,000.  Hobbyist 3D printers are even cheaper.  As the article points out, Makerbot sells a hobbyist version for under $1,000. 

The price drops, coupled with improved "sprayable" resins, plastics and other materials, has resulted in 3D printing machines moving beyond prototyping to use in final product manufacturing.  The NY Times article covers a number of examples.

The growth of 3D printing is part of a broader trend towards small manufacturing.  This trend is covered in more detail in the Intuit Future of Small Business research brief Today's Hobbyists are Tomorrow's Hobbypreneurs.

We also cover 3D printing and the trend towards small manufacturing in The New Artisan Economy research report.   

The Trend Towards U.S. Manufacturing

The New York Times article Is Manufacturing Coming Back to the U.S.? discusses the increasing and hidden costs of manufacturing in China, resulting in manufacturing in the U.S. becoming more cost effective.

Chinese manufacturing costs are going up due to rising labor costs, increasing transportation costs and the Chinese government decision to allow their currency to fluctuate - a decision that will very likely lead to the Yuan appreciating against the dollar.

The article also points out that in addition to rising costs, there are also cash flow disadvantages associated with the use of Chinese manufacturers. 

We first noticed companies starting to shift manufacturing back to the U.S. several years ago.  The companies moving manufacturing back to the U.S. at that time were firms that made products with high transportation costs relative to the value of product, and/or products with relatively small production runs.

Back then we were unsure about the strength and breadth of this trend - called "near-sourcing" in the NY Times articles but is also referred to as "insourcing," "boomeranging" and even "farmshoring."

Since we first noticed this shift we've become much more confident that the trend is real, and we expect many more companies will choose to manufacture in the U.S. in the coming decade.  The key drivers include:

1.  The increasing and hidden costs of off-shore manufacturing.  These are described in the NY Times article. 

2.  Increases in shipping costs over the next decade.  The NY Times article covers the recent steep increase in shipping container costs, but longer term costs will likely rise even more.  Due to growing developing world demand, energy prices will continue to increase and demand for shipping will outpace supply. 

3.  A growing emphasis on cutting CO2 emissions.  This will result in companies looking for shorter supply chains.  Likely taxes on CO2 emissions will also make long distance shipping more expensive.

4.  Automation and productivity gains by U.S. manufacturers.  Increased automation and productivity gains reduce the wage advantages of manufacturing abroad. 

5.  The growth of niche and customized products, resulting in shorter production runs for a growing range of manufactured products.  Shorter production runs reduce the cost advantages of manufacturing overseas. 

6.  Customer and political pressure.  Former Intel CEO Andy Grove's Business Week cover story How America Can Create Jobs is a good example of changing attitudes around U.S. manufacturing.  He is calling for a pro-U.S. manufacturing industrial policy.  We expect more pressure from government and customers to manufacture in the U.S. 

It is important to point out that while we believe the U.S. is becoming more competitive in manufacturing and some manufacturing will move back to the U.S., most won't.  Mass produced products with long production runs will still be manufactured in lower cost countries. 

Q&A on Sourcing Manufacturing in China

StartupNation has a great Q&A about sourcing manufacturing from overseas, with an emphasis on China. 

We've been involved with mulitple small businesses that have used Chinese contract manufacturers and based on their experience the information in this article looks solid.

One point that I would quibble with is around intellectual property.  From what we''ve seen and heard, the IP problems are greater than this Q&A suggests.  If you are going to manufacture in China, you need to be very careful with your IP.

Another important point is it doesn't always make sense to use a Chinese, or foreign, contract manufacturing facility.  We've seen a number of examples of companies bringing manufacturing back to the US. 

The firms choosing US contract manufacturing facilities tend to make relatively small numbers of products with short life cycles.  The reasons they moved back to the US are (1) faster turn around times, (2) the ability to more easily interact with the production team on design adjustments and changes, (3) cheaper freight (especially for those using air freight) and (4) safer IP. 

But if your product volumes are high and life cycles long, offshore manufacturing makes a lot of sense.  And with the help of good agent (see the Q&A), it is surprisingly easy.

Niche Manufacturing in Brooklyn

A trend we've been following is small manufacturing firms competing successfully through strategies built around niche markets, customization, automation, flexible systems, design services, and delivery speed. 

The New Yorks Times article In New York, No Crisis for Niche Manufacturers provides several examples of this trend.  It also talks about the growth of niche manufacturing companies in Brooklyn.  Key quote:

"In Brooklyn, the number of jobs for niche manufacturers, which are not only small but also tend to have local clients, rose by 17 percent between 2001 and 2007, said James Parrott, the chief economist of the Fiscal Policy Institute. In the same period, the number for manufacturers making products for mass markets declined by 48 percent.